Appeal details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 8544 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 10 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-02-2017
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
02-02-2017
Assessment Year
2008-2009
Appeal Filed On
03-04-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER IT(TP)A NO.460/BANG/2013 ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, WARD 11(2), BANGALORE. VS. M/S. KETERA SOFTWARE INDIA PVT. LTD. (NOW KNOWN AS DEEM SOFTWARE INDIA PVT. LTD.), LEVEL 8, PRESTIGE OBELISK, NO.3, KASTURBA ROAD, BANGALORE 560 001. PAN: AACCK 3825E APPELLANT RESPONDENT CO NO.96/BANG/2015 [IN IT(TP)A NO.460/BANG/2013] ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, WARD 11(2), BANGALORE. VS. M/S. KETERA SOFTWARE INDIA PVT. LTD. (NOW KNOWN AS DEEM SOFTWARE INDIA PVT. LTD.), LEVEL 8, PRESTIGE OBELISK, NO.3, KASTURBA ROAD, BANGALORE 560 001. PAN: AACCK 3825E CROSS OBJECTOR RESPONDENT REVENUE BY : SMT. SWAPNA DAS, JCIT(DR)(ITAT-2) BENGALURU ASSESSEE BY : SHRI S. RAGHUNATHAN, ADVOCATE DATE OF HEARING : 02.02.2017 DATE OF PRONOUNCEMENT : 22.02.2017 IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 2 OF 32 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE O RDER OF THE CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO F AR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (A) ERRED IN HOLDING THAT THE SIZE AND TURNOVER OF THE COMPANY ARE DECIDING FACTORS FOR TR EATING A COMPANY AS A COMPARABLE AND ACCORDINGLY ERRED IN EX CLUDING M/S. CELESTIAL BIOLABS LTD, M/S. FLEXTRONICS LTD. I GATE GLOBAL SOLUTIONS LTD, INFOSYS TECHNOLOGIES LTD, MINDTREE L TD, PERSISTENT SYSTEMS LTD, SASKEN COMMUNICATION TECHNOLOGIES LTD, TATA ELXSI LTD AND WIPRO LTD AS COMPARABLES. 3. THE LD. CIT (A) ERRED IN REJECTING THE DIMINIS HING REVENUE FILTER USED BY THE TPO TO EXCLUDE COMPANIES THAT DO NOT REFLECT THE NORMAL INDUSTRY TREND. 4. THE LD. CIT (A) ERRED IN NOT APPRECIATING THAT THE DIFFERENT YEAR ENDING FILTER APPLIED BY THE TPO IS NECESSARY TO EXCLUDE COMPANIES WHICH DO NOT HAVE THE SAME OR COMPARABLE FINANCIAL CYCLE AS THE TESTED PARTY. 5. THE LD. CIT(A) ERRED IN REJECTING THE EMPLOYEE COST FILTER APPLIED BY THE TPO TO SELECT COMPANIES WHICH ARE PR EDOMINANTLY INTO SOFTWARE DEVELOPMENT SERVICES. 6. THE LEARNED CIT(A), IN THE FACTS AND CIRCUMSTA NCES OF THE CASE, ERRED IN HOLDING THAT M/S. AVANI CIMCON TECHN OLOGIES, CANNOT BE TAKEN AS A COMPARABLE. 7. THE LEARNED CIT(A), IN THE FACTS AND CIRCUMSTA NCES OF THE CASE, ERRED IN HOLDING THAT M/S. KALS INFORMATION S YSTEMS, CANNOT BE TAKEN AS A COMPARABLE. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 3 OF 32 8. THE CIT(A) ERRED IN DIRECTING THE AO TO RECOMP UTE THE DEDUCTION ALLOWABLE U/S 10A OF THE I.T. ACT AFTER R EDUCING THE COMMUNICATION EXPENSES OF RS. 20,46,519/- AND EXPEN SES INCURRED IN FOREIGN CURRENCY OF RS. 6,15,235/- FROM THE TOTAL TURNOVER ALSO. 9. THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THERE IS NO PROVISION IN SECTION 10A WHICH REQUIRES THE CONCERN ED EXPENSES, WHICH ARE REQUIRED TO BE REDUCED FROM THE EXPORT TU RNOVER AS PER CLAUSE (IV) OF THE EXPLANATION TO SECTION 10A TO BE REDUCED FROM THE TOTAL TURNOVER ALSO. 10. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE JURISDICTION HIGH COURT DECISION RELIED UPON BY HIM HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEALS HAVE BEEN FI LED BEFORE THE HON'BLE SUPREME COURT WHICH IS STILL PENDING. 11. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE U RGED AT THE TIME OF HEARING. IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED. 12. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, T O AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION ASSA ILING THE ORDER OF CIT(APPEALS) ON THE FOLLOWING GROUNDS:- THE GROUNDS STATED HERE UNDER ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO ONE ANOTHER: 1. COMPARABILITY ANALYSIS ADOPTED BY THE TPO FOR DETERMINATION OF ARM'S LENGTH PRICE. A) THE LD. TPO AND THE LD. CIT(A) ERRED IN FACT AND LA W IN INCLUDING M/S. E-ZEST SOLUTIONS AS A COMPARABLE COM PANY, WITHOUT CONSIDERING THE FUNCTIONAL DIFFERENCES OF T HE SAID COMPANY VIS-A-VIS THE RESPONDENT. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 4 OF 32 B) THE LD. TPO AND THE LD. CIT(A) ERRED IN FACT AND LA W IN INCLUDING M/S LGS GLOBAL LTD. AS A COMPARABLE COMPA NY, WITHOUT CONSIDERING THE FUNCTIONAL DIFFERENCES OF T HE SAID COMPANY VIS-A-VIS THE RESPONDENT. C) THE LD. CIT(A) ERRED ON NOT DRAWING REFERENCE TO T HE FUNCTIONAL DISSIMILARITY IN RESPECT OF THE FOLLOWING COMPARABL E COMPANIES, NAMELY, (A) M/S. CELESTIAL BIOLABS LTD., (B) PERSIS TENT SYSTEMS LTD., (C) SASKEN COMMUNICATION TECHNOLOGIES LTD., ( D) TATA ELXSI LTD. AND (E) WIPRO LTD VIS-A-VIS THE RESPONDE NT WHILE REJECTING THE AFORESAID COMPANIES. D) THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF T HE LD.AO/ LD. TPO ON FACTS AND IN LAW IN CONSIDERING A SET OF 'SE CRET DATA', I.E. DATA WHICH WAS NOT AVAILABLE IN PUBLIC DOMAIN, IN A RRIVING AT A FRESH SET OF COMPANIES USING HIS POWER UNDER SECTIO N 133(6), WHICH IS GROSSLY UNJUSTIFIED. 2 NON-ALLOWANCE OF APPROPRIATE ADJUSTMENTS TO THE COMPARABLE COMPANIES, BY THE AO/TPO THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LD. AO/THE LD. TPO IN NOT ALLOWING APPROPRIATE ADJUSTMENTS UND ER RULE 10B TO ACCOUNT FOR, INTER ALIA, DIFFERENCES IN DIFFERENCES IN (A) MARKETING EXPENDITURE ADJUSTMENT, (B) RESEARCH AND DEVELOPMENT EXPENDITURE ADJUSTMENT; AND (C) RISK PR OFILE BETWEEN RESPONDENT AND THE COMPARABLE COMPANIES. 3. REDUCTION IN DEDUCTION UNDER SECTION 10A OF THE ACT A) THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE A CTION OF THE AO IN COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT AT RS. 25,058,002. B) THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE AO IN REDUCING COMMUNICATION EXPENSES OF RS. 2,046,519 FR OM THE EXPORT TURNOVER WITHOUT CONSIDERING THE FACT THAT T HE SAID COMMUNICATION EXPENSES OF RS. 2,046,519 HAS ALREADY BEEN REDUCED FROM BOTH THE EXPORT TURNOVER AND TOTAL TUR NOVER ON THE POSITION THAT SUCH EXPENSES ARE ATTRIBUTABLE TO THE DELIVERY OF SOFTWARE OUTSIDE INDIA. C) THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE AO IN REDUCING TRAVEL EXPENSES INCURRED IN FOREIGN CURREN CY AMOUNTING IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 5 OF 32 TO RS. 615,235 FROM THE EXPORT TURNOVER, WITHOUT CO NSIDERING THE FACT THAT THE SAID TRAVEL EXPENSES ARE NOT INCURRED FOR THE PURPOSE OF RENDERING ANY TECHNICAL SERVICES OUTSIDE INDIA. 4. RELIEF A) RESPONDENT PRAYS THAT DIRECTIONS BE GIVEN TO GRA NT ALL SUCH RELIEF ARISING FROM THE ABOVE GROUNDS AND ALSO ALL RELIEF CONSEQUENTIAL THERETO. B) RESPONDENT CRAVES LEAVE TO ADD TO OR ALTER, BY DELETION, SUBSTITUTION OR OTHERWISE, THE ABOVE GROUNDS OF APP EAL, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. 3. THE ASSESSEE HAS ALSO FILED THE FOLLOWING ADDITI ONAL GROUNDS STATING THAT THE DOCUMENTS IN RESPECT OF THESE ADDITIONAL G ROUNDS ARE ALREADY BEFORE THE TRIBUNAL AND NO FRESH EXAMINATION OF FAC TS IS REQUIRED:- 1. THE LEARNED TPO HAS ERRED IN SELECTING CERTAIN COMPARABLES IN THE ORDER U/S 92CA , WITHOUT CONSIDERING THAT THE SCALE OF OPERATIONS OF THE COMPANIES VIS-A-VIS THE TURNOVER OF THE APPELLANT (VIZ . INR 17.07 CRORES) FOR FY 2007-08. ACCORDINGLY , THE FOLLOWING COMPANIES CANNOT BE COMPARED TO THE APPELLANT ON APPLICATION OF TURNOVER FILTER TO CONSIDER IS THE TURNOVER/RECEIPTS OF APPELLANT AND RANGE OF UPPER LIMIT AT TEN TIMES AND LOWER LIMIT ALSO TEN T IMES. I.E ., ONE TENTH . THUS , THE UPPER AND LOWER LIMIT SHALL BE INR 1 . 70 CRORES (APPELLANT ' S TURNOVER * 1/1 0) AND INR 170 . 7 CRORES (APPELLANTS TURNOVER*10) RESPECTIVELY : SI. NAME OF THE COMPANY TURNOVER MARGIN AS NO. (IN CRS.) . PERTPO 1 FLEXTRONICS SOFTWARE SYSTEMS LTD. 953 . 35 7.86% 2 IGATE GLOBAL SOLUTIONS LTD. 781 . 51 13 . 99% 3 INFOSYS LTD. 15 , 648 40.37% 4 MINDREE LTD (SEG). 572.97 16 . 41% 5 PERSISTENT SYSTEMS LTD . 382 . 88 20.31% IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 6 OF 32 6 SASKEN COMMUNICATION TECHNOLOGIES 335 . 80 7 . 58% LTD. 7 TATA ELXS I LTD . (SEG) 342 . 86 18.97% 8 WIPRO LTD . (SEG) 11 , 956 28 . 45% 2. THE AO / TPO ERRED IN LAW IN APPLYING AN ARBITRARY FILTER TO REJECT COMPANIES HAVING RELATED PARTY TRANSACTIONS GREATER THAN 25% OF SALES. FURTHER , THE HON ' BLE CIT(A) ALSO ERRED IN UPHOLDING THE RELATED PARTY TRANSACTION FILTER OF 2 5% , DISREGARDING THE APPELLANT ' S GROUND FOR APPLICATION OF THE RELATED PARTY TRANSACTION FILTER AT A THRESHOLD OF 10% OR 15% OF SALES. PRAYER: THE PETITIONER PRAYS THAT THE ABOVE GROUNDS BE ALLO WED BY THE HON ' BLE BENCH . 4. SINCE THE APPEAL AND THE CO WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 5. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS FILED A CHART WITH RESPECT TO THE COMPARABLES ALONG WITH COMPLETE DETAILS TAKEN BY THE TPO FOR DETERMINING THE ALP OF THE INT ERNATIONAL TRANSACTIONS. 6. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE, A WHOLLY OWNED SUBSIDIARY OF KETERA TECHNOLOGIES INC. , USA, IS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT SERV ICES TO KETERA US, WHICH IS ITS ASSOCIATED ENTERPRISE (AE), FOR WHICH IT IS REMUNERATED ON A COST PLUS 15% MARGIN. IT FILED RETURN OF INCOME AN D THE CASE WAS TAKEN UP FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO MADE A IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 7 OF 32 REFERENCE U/S. 92CA TO THE TPO FOR DETERMINATION OF THE ALP OF THE ASSESSEES INTERNATIONAL TRANSACTION WITH ITS AE. 7. THE ASSESSEE HAS RENDERED TO ITS AE SOFTWARE DEV ELOPMENT SERVICES AMOUNTING TO RS. 17,07,19,114. AS REQUIRED UNDER SECTION 92D OF THE ACT READ WITH RULE 10D OF INCOME-TAX RULE, 1962 (THE RULES), IT HAD MAINTAINE D THE RELEVANT DOCUMENTATION (TP STUDY) AND COMPLETED THE ALP OF THE SOFTWARE DEVELOPMENT SERVICES RENDERED, USING THE T RANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD WITH A PROFIT LEVEL INDICATOR (PLI) OF NET OPERATING PROFIT MARGIN BASE D O N SALES (OP/SALES). THE APPELLANT HAD USED THE PROWESS DATABASE TO CONDUCT A SEARCH FOR COMPARABLE COMPANIES AND HAD APPLIED VARIOUS QUANTI TATIVE AND QUALITATIVE FILTERS TO ARRIVE AT A SET OF 11 COMPARABLE COMPANI ES WITH AN AVERAGE PROFIT MARGIN OF 10.24%. SINCE THE APPELLANT'S OWN PROFIT MARGIN OF 3.72% WAS MORE THAN THE ARITHMETICAL MEAN OF THE COMPARABLES, IT CONCLUDED THAT ITS INTERNATIONAL TRANSACTIONS WERE AT ARM'S LENGTH. TH E TPO ISSUED A NOTICE ON 18.08.2010 INITIATING THE TRANSFER PRICING (TP) PRO CEEDINGS AND IN RESPONSE TO THE NOTICE, THE APPELLANT FILED THE TP STUDY AND OTHER REQUISITE DOCUMENTS ON 17.09.2010. SUBSEQUENTLY, THE TPO ISSU ED A SHOW-CAUSE NOTICE ON 04.10.2011, PROPOSING TO REJECT ALL COMPA RABLE COMPANIES SELECTED BY THE APPELLANT, SELECT A NEW SET OF 26 C OMPARABLE COMPANIES, ARRIVE AT AN ARITHMETICAL MEAN MARGIN OF 32.07% VIS -A-VIS THE APPELLANT'S MARGIN 16.43%, AND MAKE A TP ADJUSTMENT OF RS. 2,29 ,34,941. IN RESPONSE TO THE SHOW-CAUSE NOTICE, THE APPELLANT MA DE DETAILED WRITTEN IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 8 OF 32 SUBMISSIONS ON 14.10.2011, PLACING ON RECORD ALL LE GAL AND FACTUAL ARGUMENTS. 8. THE TPO PASSED AN ORDER UNDER SECTION 92CA ON 31 .10.2011, COMPUTING THE ARITHMETICAL MEAN MARGINS OF THE 20 C OMPARABLES SELECTED BY HIM AT 23.95%, AFTER ALLOWING A NEGATIVE WORKING CAPITAL ADJUSTMENT OF 0.30%, AND PROPOSING A TP ADJUSTMENT OF RS. 1,18,65 ,269. ON RECEIPT OF THE TPOS ORDER, THE AO ISSUED A DRAFT ASSESSMENT O RDER ON 15.12.2011 INCORPORATING THE TP ADJUSTMENT PROPOSED BY TPO AND REDUCING THE DEDUCTION CLAIMED UNDER SECTION 10A. AFTER THE APPE LLANT FILED A LETTER WITH THE AO PROPOSING TO FILE AN APPEAL WITH THE CIT(APP EALS), HE PASSED THE FINAL ASSESSMENT ORDER UNDER SECTION 143(3) READ WI TH SECTION 144C ON 07.02.2012, DETERMINING THE APPELLANT'S TAXABLE INC OME AT RS.1,23,30,510. 9. IN THE FINAL ASSESSMENT ORDER, THE AO MADE THE F OLLOWING ADJUSTMENTS TO THE APPELLANT'S RETURNED INCOME RESU LTING IN A DEMAND OF RS. 23,89,664:- REDUCTION FROM EXPORT TURNOVER COMMUNICATION EXPENS ES OF RS. 20,46,519 AND TRAVEL EXPENDITURE OF RS. 6,15,235 IN CURRED IN FOREIGN CURRENCY, WITHOUT REDUCING THE SAME FROM TOTAL TURN OVER, THEREBY REDUCING THE DEDUCTION UNDER SECTION 10A; ADDITION OF RS. 1,18,65,269 ON ACCOUNT OF TP ADJUST MENT; AND LEVY OF INTEREST OF RS. 7,64,042 UNDER SECTION 234B . 10. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE CIT(APPEALS). PARTLY CONVINCED WITH THE ARGUMENTS OF THE ASSESSEE, THE IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 9 OF 32 CIT(APPEALS) HAS EXCLUDED 13 COMPARABLES OUT OF FOL LOWING 20 COMPARABLES ADOPTED BY THE TPO:- SL.NO. NAME OF THE C OMPANY OP /TC % 1. AVANI CIMCON TECHNOLOGIES 25.62 2. BODHTREE CONSULTING LTD. 18.72 3. CELESTIAL LABS LTD., 87.94 4. E-ZEST SOLUTIONS LTD. 29.81 5. FLEXTRONICS (ARICENT) 7.86 6. IGATE GLOBAL SOLUTIONS LTD. 13.99 7. INFOSYS 40.37 8. KALS INFORMATION SYSTEMS LTD (SEG) 41.94 9. LGS GLOBAL LTD. 27.52 10. MINDTREE LTD. (SEG) 16.41 11. PERSISTENT SYSTEMS LTD. 20.31 12. QUINTEGRA SOLUTION LTD. 21.74 13. R SYSTEMS INTERNATIONAL LTD (SEG) 15.30 14. R S SOFTWARE (INDIA) LTD 7.41 15. SASKEN COMMUNICATION TECHNOLOGIES LTD (SEG) 7.5 8 16. TATA ELXSI (SEG) 18.97 17. THIRDWARE SOLUTION LTD. 19.35 18. WIPRO LTD. (SEG) 28.45 19. SOFTSOL INDIA LTD. 17.89 20. LUCID SOFTWARE LTD. 16.50 AVERAGE 23.65 11. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THROUGH CO, THE ASSESSEE HAS SOUGHT CERTAIN ADJUSTMENTS IN DETERMINATION OF THE ALP. 12. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT EXCLUSION OF THE COMPARABLES MADE BY THE CIT(APPEALS) WAS SQUARELY COVERED BY THE VARIOUS ORDERS OF THE TRIBUNAL. WITH REGARD TO (1) AVANI CINCOM TECHNOLOGIES (2) CELESTIAL BIOLABS LTD. (3) E- ZEST SOLUTIONS LTD. (4) INFOSYS LTD. (5) KALS INFORMATION SYSTEMS LTD. (SEG ) (6) PERSISTENT SYSTEMS LTD. (7) TATA ELXSI LTD. AND (8) WIPRO LTD., THE LD. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 10 OF 32 COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THESE C OMPARABLES ARE FUNCTIONALLY DIFFERENT AND THEIR PROFILE WERE EXAMI NED BY THE TRIBUNAL IN THE CASE OF M/S. INFINEON TECHNOLOGIES INDIA PVT. LTD. V. DCIT, 71 TAXMANN.COM 139 (BANG. TRIB) AND IT HAS BEEN CATEGORICALLY HELD THAT THESE COMPARABLES ARE FUNCTIONALLY DIFFERENT. THE PROFIL E OF THE ASSESSEE AND OF M/S. INFINEON TECHNOLOGIES INDIA PVT. LTD. ( SUPRA ) IS ALMOST SIMILAR AND THE ASSESSMENT YEAR IS ALSO FOR AY 2008-09. THEREFORE, THE ISSUE OF DETERMINATION OF COMPARABLES ON FUNCTIONAL ASPECT I S COVERED BY THIS ORDER OF THE TRIBUNAL. 13. THE LD. DR PLACED HEAVY RELIANCE UPON THE ORDER OF THE TPO. 14. HAVING CAREFULLY EXAMINED THE ORDER OF THE TRIB UNAL IN THE CASE OF M/S. INFINEON TECHNOLOGIES INDIA PVT. LTD. V. DCIT (SUPRA) , WE FIND THAT THE SAID ASSESSEE IS ALSO ENGAGED IN SOFTWARE DEVELOPME NT SERVICES TO ITS AE AND THE TRIBUNAL HAS EXAMINED THE FUNCTIONAL PROFIL E OF THE AFORESAID COMPARABLES. HAVING EXAMINED THE FUNCTIONAL PROFIL E IN DETAIL, THE TRIBUNAL HAS HELD THAT THESE COMPARABLES ARE TO BE EXCLUDED FROM THE LIST OF COMPARABLES WHILE DETERMINING THE ALP FOR INTERNATI ONAL TRANSACTIONS. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT OBSE RVATIONS OF THE TRIBUNAL HEREUNDER:- 6.2 WE HAVE HEARD BOTH PARTIES AND PERUSED THE MA TERIAL ON RECORD. WE FIND THAT THE FOLLOWING WERE THE RELEVAN T OBSERVATIONS AND FINDINGS OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF SONUS NETWORKS INDIA PVT. LTD., IN IT(TP)A NO.1567/ BANG/2012 DT.14.5.2015 FOR ASSESSMENT YEAR 2008-09 AT PARAS 1 0 TO 19.3 IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 11 OF 32 THEREOF, WHILE EXCLUDING THE 12 OF THE AFORESAID CO MPANIES LISTED AT S.NOS.1, 3 TO 13 (SUPRA), WHICH IS EXTRACTED HEREUN DER :- 10. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ON THE 12 COMPARABLE COMPANIES IN THE AFOR ESAID DECISION:- COMPANIES INCORRECTLY ADOPTED AS COMPARABLES BY TH E TPO AS PER THE CONTENTION OF THE ASSESSEE. 7.0 AVANI CINCOM TECHNOLOGIES LTD. 7.1 THIS COMPANY WAS SELECTED BY THE TPO AS A COMPA RABLE. THE ASSESSEE OBJECTS TO THE INCLUSION OF THIS COMPA NY AS A COMPARABLE ON THE GROUND THAT THIS COMPANY IS NOT F UNCTIONALLY COMPARABLE TO THE ASSESSEE AS IT IS INTO SOFTWARE P RODUCTS WHEREAS THE ASSESSEE OFFERS SOFTWARE DEVELOPMENT SERVICES T O ITS AES. THE TPO HAD REJECTED THE OBJECTIONS OF THE ASSESSE E ON THE GROUND THAT THIS COMPARABLE COMPANY HAS CATEGORIZED ITSELF AS A PURE SOFTWARE DEVELOPER, JUST LIKE THE ASSESSEE, AN D HENCE SELECTED THIS COMPANY AS A COMPARABLE. FOR THIS PURPOSE, TH E TPO HAD RELIED ON INFORMATION SUBMITTED BY THIS COMPANY IN RESPONSE TO ENQUIRIES CARRIED OUT UNDER SECTION 133(6) OF THE A CT FOR COLLECTING INFORMATION ABOUT THE COMPANY DIRECTLY. 7.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATIV E REITERATED THE ASSESSEE'S OBJECTIONS FOR THE INCLUS ION OF THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES ON TH E GROUND THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AS IT IS INTO SOFTWARE PRODUCTS. IT IS ALSO SUBMIT TED THAT THE SEGMENTAL DETAILS OF THIS COMPANY ARE NOT AVAILABLE AND THE ANNUAL REPORT AVAILABLE IN THE PUBLIC DOMAIN IS NOT COMPLETE. IT WAS FURTHER CONTENDED THAT THE INFORMATION OBTAINED BY THE TPO UNDER SECTION 133(6) OF THE ACT, ON THE BASIS OF WH ICH THE TPO INCLUDED THIS COMPANY IN THE FINAL LIST OF COMPARAB LE COMPANIES, HAS NOT BEEN SHARED WITH THE ASSESSEE. IN SUPPORT OF THIS CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE P LACED RELIANCE ON THE FOLLOWING JUDICIAL DECISIONS : I) TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. V DC IT (ITA NO.1054/BANG/2011) II) TELECORDIA TECHNOLOGIES INDIA PVT LTD V ACIT ( ITA NO.7821/MUM/2011) IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 12 OF 32 IT WAS ALSO SUBMITTED THAT THIS COMPANY HAS BEEN HE LD TO BE FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE BY A CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE F OR ASSESSMENT YEAR 2007-08 IN ITA NO.845/BANG/2011 DT.22.2.2013. 7.3 THE LEARNED AUTHORISED REPRESENTATIVE FURTHER S UBMITTED THAT THE FACTS PERTAINING TO THIS COMPANY HAS NOT C HANGED FROM THE EARLIER YEAR (I.E. ASSESSMENT YEAR 2007-08) TO THE PERIOD UNDER CONSIDERATION (I.E. ASSESSMENT YEAR 2008-09). IN S UPPORT OF THIS CONTENTION, IT WAS SUBMITTED THAT :- (I) THE EXTRACT FROM THE WEBSITE OF THE COMPANY CLE ARLY INDICATES THAT IT IS PRIMARILY ENGAGED IN DEVELOPMENT OF SOFT WARE PRODUCTS. THE EXTRACT MENTIONS THAT THIS COMPANY OFFERS CUSTO MISED SOLUTIONS AND SERVICES IN DIFFERENT AREAS; (II) THE WEBSITE OF THIS COMPANY EVIDENCES THAT TH IS COMPANY DEVELOPS AND SELLS CUSTOMIZABLE SOFTWARE SOLUTIONS LIKE DX CHANGE, CARMA, ETC. 7.4 THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT A CO-ORDINATE BENCH OF THE TRIBUNAL IN ITS ORDER IN C URRAM SOFTWARE INTERNATIONAL PVT. LTD., IN ITS ORDER IN ITA NO.128 0/BANG/2012 DT.31.7.2013 HAS REMANDED THE MATTER BACK TO THE FI LE OF THE ASSESSING OFFICER / TPO TO EXAMINE THE COMPARABILIT Y OF THIS COMPANY AFRESH, BY MAKING THE FOLLOWING OBSERVATION S AT PARAS 9.5.2 AND 9.5.3 THEREOF :- 9.5.2 AS REGARDS THE SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE, WE ARE UNABLE TO AGREE T HAT THIS COMPANY HAS TO BE DELETED FROM THE LIST OF COMPARAB LES ONLY BECAUSE IT HAS BEEN DELETED FROM THE SET OF COMPARA BLES IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA). NO DOUBT THIS COMPANY HAS BEEN DELETED AS A COMPARABLE IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUP RA) AND THIS CAN BE A GOOD GUIDANCE TO DECIDE ON THE COMPARABILI TY IN THE CASE ON HAND ALSO. THIS ALONE, HOWEVER, WILL NOT S UFFICE FOR THE FOLLOWING REASONS :- (I) THE ASSESSEE NEEDS TO DEMONSTRATE THAT THE FAR ANALYSIS AND OTHER RELEVANT FACTS OF THE TRILOGY CASE ARE EQUALL Y APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE ALSO. UNLESS THE FACTS AND THE FAR ANALYSIS OF TRILOGY CASE IS COMPARABLE TO THAT OF THE IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 13 OF 32 ASSESSEE IN THE CASE ON HAND, COMPARISON BETWEEN TH E TWO IS NOT TENABLE. (II) AFTER DEMONSTRATING THE SIMILARITY AND THE CO MPARABILITY BETWEEN THE ASSESSEE AND THE TRILOGY CASE, THE ASSE SSEE ALSO NEEDS TO DEMONSTRATE THAT THE FACTS APPLICABLE TO T HE ASSESSMENT YEAR 2007-08, THE YEAR FOR WHICH THE DECISION IN CA SE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) WAS REN DERED ARE ALSO APPLICABLE TO THE YEAR UNDER CONSIDERATION I.E . ASSESSMENT YEAR 2008-09. 9.5.3 IT IS A WELL SETTLED PRINCIPLE THAT THE A SSESSEE IS REQUIRED TO PERFORM FAR ANALYSIS FOR EACH YEAR AND IT IS QUI TE POSSIBLE THAT THE FAR ANALYSIS CAN BE DIFFERENT FOR EACH OF THE YEARS. THAT BEING SO, THE PRINCIPLE APPLICABLE TO ONE PARTICULA R YEAR CANNOT BE EXTRAPOLATED AUTOMATICALLY AND MADE APPLICABLE T O SUBSEQUENT YEARS. TO DO THAT, IT IS NECESSARY TO FIRST ESTABL ISH THAT THE FACTS AND ATTENDANT FACTORS HAVE REMAINED THE SAME SO THA T THE FACTORS OF COMPARABILITY ARE THE SAME. VIEWED IN THAT CONT EXT, THE ASSESSEE HAS NOT DISCHARGED THE ONUS UPON IT TO EST ABLISH THAT THE DECISION RENDERED IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) CAN BE APPLIED TO THE FACTS OF THE CASE AND THAT TOO OF AN EARLIER YEAR I.E. ASSESSMENT YEAR 2 007-08. THE ASSESSEE, IN OUR VIEW, HAS NOT DEMONSTRATED THAT TH E FACTS OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) ARE IDENTICAL TO THE FACTS OF THE CASE ON HAND AND THAT THE PROFI LE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS SIMILA R TO THAT OF THE EARLIER ASSESSMENT YEAR 2007-08. IN VIEW OF FACTS AS DISCUSSED ABOVE, WE DEEM IT FIT TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER / TPO TO EXAMINE THE COMPARABILIT Y OF THIS COMPANY AFRESH BY CONSIDERING THE ABOVE OBSERVATION S. THE TPO IS DIRECTED TO MAKE AVAILABLE TO THE ASSESSEE INFOR MATION OBTAINED UNDER SECTION 133(6) OF THE ACT AND TO AFFORD THE A SSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO MAKE ITS SUBMISSIONS IN THE MATTER, WHICH SHALL BE DULY CONSIDERED BEFOR E PASSING ORDERS THEREON. IT IS ORDERED ACCORDINGLY. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITS THAT THIS COMPANY WAS SELECTED AS A COMPARABLE BY THE TPO NOT BY ANY FAR ANALYSIS OR AS PER THE SEARCH PROCESS CONDUCTED BY THE TPO, BUT ONLY AS AN ADDITIONAL COMPARABLE FOR THE REASON THAT IT WAS SELECTED AS A COMPARABLE IN THE EARLIER YEAR I.E. A SSESSMENT YEAR 2007-08 ON THE BASIS OF INFORMATION OBTAINED UNDER SECTION IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 14 OF 32 133(6) OF THE ACT. IN THIS REGARD, THE LEARNED AUT HORISED REPRESENTATIVE TOOK US THROUGH THE RELEVANT PORTION S OF THE TP ORDER UNDER SECTION 92CA OF THE ACT AND THE SHOW CA USE NOTICES FOR BOTH THE EARLIER YEAR I.E. ASSESSMENT YEAR 200 7-08 AND FOR THIS YEAR AND CONTENDED THAT THE SELECTION OF THIS COMPANY AS A COMPARABLE VIOLATES THE PRINCIPLE ENUNCIATED IN CUR RAM SOFTWARE INTERNATIONAL PVT. LTD. (SUPRA) THAT A COMPANY CAN BE SELECTED AS A COMPARABLE ONLY ON THE BASIS OF FAR ANALYSIS CONDUC TED FOR THAT YEAR AND THEREFORE PLEADED FOR ITS EXCLUSION. THE LEARNED AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT HE HA S BROUGHT ON RECORD SUFFICIENT EVIDENCE TO SHOW THAT THE FUNCTIO NAL PROFILE OF THIS COMPANY REMAINS UNCHANGED FROM THE EARLIER YEA R AND HENCE THE FINDINGS RENDERED BY THE CO-ORDINATE BENCHES OF THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007 -08 (SUPRA) AND IN OTHER CASES LIKE TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) ARE APPLICABLE TO THE YEAR UNDER CONSI DERATION AS WELL. 7.5 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUPPORTED THE ORDER OF THE TPO / DRP FOR INCLUSION OF THIS COMPANY AVANI CINCOM TECHNOLOGIES LTD. IN THE FINAL SET OF COMPARABLES. 7.6.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULL Y CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE RECORD THAT THE TPO HAS INCLUDED THIS COMPANY IN THE FINAL SET OF COMPARABLES ONLY ON THE BASIS OF INFORMATION OBTAIN ED UNDER SECTION 133(6) OF THE ACT. IN THESE CIRCUMSTANCES, IT WAS THE DUTY OF THE TPO TO HAVE NECESSARILY FURNISHED THE INFORM ATION SO GATHERED TO THE ASSESSEE AND TAKEN ITS SUBMISSIONS THEREON INTO CONSIDERATION BEFORE DECIDING TO INCLUDE THIS COMPA NY IN ITS FINAL LIST OF COMPARABLES. NON-FURNISHING THE INFORMATIO N OBTAINED UNDER SECTION 133(6) OF THE ACT TO THE ASSESSEE HAS VITIATED THE SELECTION OF THIS COMPANY AS A COMPARABLE. 7.6.2 WE ALSO FIND SUBSTANTIAL MERIT IN THE CONTENT ION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THIS COMPANY HAS BEEN SELECTED BY THE TPO AS AN ADDITIONAL COMPARABLE ONL Y ON THE GROUND THAT THIS COMPANY WAS SELECTED IN THE EARLIE R YEAR. EVEN IN THE EARLIER YEAR, IT IS SEEN THAT THIS COMPANY WAS NOT SELECTED ON THE BASIS ON ANY SEARCH PROCESS CARRIED OUT BY THE TPO BUT ONLY ON THE BASIS OF INFORMATION COLLECTED UNDER SECTION 133(6) OF THE ACT. APART FROM PLACING RELIANCE ON THE JUDICIAL D ECISION CITED IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 15 OF 32 ABOVE, INCLUDING THE ASSESSEE'S OWN CASE FOR ASSESS MENT YEAR 2007-08, THE ASSESSEE HAS BROUGHT ON RECORD EVIDENC E THAT THIS COMPANY IS FUNCTIONALLY DIS-SIMILAR AND DIFFERENT F ROM THE ASSESSEE AND HENCE IS NOT COMPARABLE. THEREFORE TH E FINDING EXCLUDING IT FROM THE LIST OF COMPARABLES RENDERED IN THE IMMEDIATELY PRECEDING YEAR IS APPLICABLE IN THIS YE AR ALSO. SINCE THE FUNCTIONAL PROFILE AND OTHER PARAMETERS BY THIS COMPANY HAVE NOT UNDERGONE ANY CHANGE DURING THE YEAR UNDER CONS IDERATION WHICH FACT HAS BEEN DEMONSTRATED BY THE ASSESSEE, F OLLOWING THE DECISIONS OF THE CO-ORDINATE BENCHES OF THIS TRIBUN AL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.845/BANG/2011 DT.22.2.2013, AND IN THE CASE OF T RILOGY E- BUSINESS SOFTWARE INDIA PVT. LTD. (ITA NO.1054/BANG /2011), WE DIRECT THE A.O./TPO TO OMIT THIS COMPANY FROM THE L IST OF COMPARABLES. 9. CELESTIAL BIOLABS LTD. 9.1 THIS COMPARABLE WAS SELECTED BY THE TPO FOR INC LUSION IN THE FINAL LIST OF COMPARABLES. BEFORE THE TPO, THE ASSESSEE HAD OBJECTED TO THE INCLUSION OF THIS COMPANY IN THE LI ST OF COMPARABLES FOR THE REASONS THAT IT IS FUNCTIONALLY DIFFERENT FORM THE ASSESSEE AND THAT IT FAILS THE EMPLOYEE COST FI LTER. THE TPO, HOWEVER, BRUSHED ASIDE THE OBJECTIONS RAISED BY THE ASSESSEE BY STATING THAT THE OBJECTIONS OF FUNCTIONAL DISSIMILA RITY HAS BEEN DEALT WITH IN DETAIL IN THE T.P. ORDER FOR ASSESSME NT YEAR 2007- 08. AS REGARDS THE OBJECTION RAISED IN RESPECT OF THE EMPLOYEE COST FILTER ISSUE, THE TPO REJECTED THE OBJECTIONS BY OBSERVING THAT THE EMPLOYEE COST FILTER IS ONLY A TRIGGER TO KNOW THE FUNCTIONALITY OF THE COMPANY. 9.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATIV E CONTENDED THAT THIS COMPANY IS NOT FUNCTIONALLY COM PARABLE, AS THE COMPANY IS INTO BIO-INFORMATICS SOFTWARE PRODUC T / SERVICES AND THE SEGMENTAL BREAK UP IS NOT PROVIDED. IT WAS SUBMITTED THAT:- (I) THIS COMPANY IS ENGAGED IN THE DEVELOPMENT OF PRODUCTS IN THE FIELD OF BIO-TECHNOLOGY, PHARMACEUTICALS, ETC. AND THEREFORE IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE; (II) THIS COMPANY HAS BEEN HELD TO BE FUNCTIONALLY INCOMPARABLE TO SOFTWARE SERVICE PROVIDERS BY THE DECISION OF TH E CO-ORDINATE IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 16 OF 32 BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE F OR ASSESSMENT YEAR 2007-08 (SUPRA); (III) THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITS ORDER IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) AT PARA 43 THEREOF HAD OBSERVED ABOUT THIS COMPANY THA T .. AS EXPLAINED EARLIER, IT IS A DIVERSIFIED COM PANY AND THEREFORE CANNOT BE CONSIDERED AS COMPARABLE FUNCTI ONALLY WITH THE ASSESSEE. THERE HAS BEEN NO ATTEMPT TO IDENTIF Y, ELIMINATE AND MAKE ADJUSTMENT OF THE PROFIT MARGINS SO THAT T HE DIFFERENCE IN FUNCTIONAL COMPARABILITY CAN BE ELIMINATED. BY NOT RESORTING TO SUCH A PROCESS OF MAKING ADJUSTMENTS, THE TPO HA S RENDERED THIS COMPANY AS NOT QUALIFYING FOR COMPARABILITY. WE THEREFORE ACCEPT THE PLEA OF THE ASSESSEE IN THIS REGARD. (IV) THE REJECTION / EXCLUSION OF THIS COMPANY AS A COMPARABLE FOR ASSESSMENT YEAR 2007-08 FOR SOFTWARE SERVICE PR OVIDERS HAS BEEN UPHELD BY THE CO-ORDINATE BENCHES OF THIS TRIB UNAL IN THE CASES OF LG SOFT INDIA PVT. LTD. IN ITA NO.112/BANG /2011, CSR INDIA PVT. LTD. IN IT(TP)A NO.1119/BANG/2011 AND BY THE ITAT, DELHI BENCH IN THE CASE OF TRANSWITCH INDIA PVT. LT D. IN ITA NO.6083/DEL/2010. (V) THE FACTS PERTAINING TO THIS COMPANY HAS NO T CHANGED FROM ASSESSMENT YEAR 2007-08 TO ASSESSMENT YEAR 2008-09 AND THEREFORE THIS COMPANY CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPARABILITY IN THE INSTANT CASE AND HENCE OUGHT T O BE REJECTED. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE HAS ALS O REFERRED TO AND QUOTED FROM VARIOUS PARTS OF THE ANNUAL REPORT OF T HE COMPANY. 9.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUPPORTED THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE COMPANIES. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE DECISIONS CITED AND RELIED ON BY THE ASSES SEE ARE FOR ASSESSMENT YEAR 2007-08 AND THEREFORE THERE CANNOT BE AN ASSUMPTION THAT IT WOULD CONTINUE TO BE APPLICABLE FOR THE PERIOD UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2008-09. 9.4.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED AN D CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WHILE IT IS TR UE THAT THE DECISIONS CITED AND RELIED ON BY THE ASSESSEE WERE WITH RESPECT TO THE IMMEDIATELY PREVIOUS ASSESSMENT YEAR, AND THERE CANNOT BE AN IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 17 OF 32 ASSUMPTION THAT IT WOULD CONTINUE TO BE APPLICABLE FOR THIS YEAR AS WELL, THE SAME PARITY OF REASONING IS APPLICABLE TO THE TPO AS WELL WHO SEEMS TO HAVE SELECTED THIS COMPANY AS A C OMPARABLE BASED ON THE REASONING GIVEN IN THE TPOS ORDER FOR THE EARLIER YEAR. IT IS EVIDENTLY CLEAR FROM THIS, THAT THE TP O HAS NOT CARRIED OUT ANY INDEPENDENT FAR ANALYSIS FOR THIS COMPANY F OR THIS YEAR VIZ. ASSESSMENT YEAR 2008-09. TO THAT EXTENT, IN O UR CONSIDERED VIEW, THE SELECTION PROCESS ADOPTED BY THE TPO FOR INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES IS DEFECTIV E AND SUFFERS FROM SERIOUS INFIRMITY. 9.4.2 APART FROM RELYING ON THE AFORE CITED JUDICIA L DECISIONS IN THE MATTER (SUPRA), THE ASSESSEE HAS BROUGHT ON REC ORD SUBSTANTIAL FACTUAL EVIDENCE TO ESTABLISH THAT THIS COMPANY IS FUNCTIONALLY DIS- SIMILAR AND DIFFERENT FROM THE ASSESSEE IN THE CASE ON HAND AND IS THEREFORE NOT COMPARABLE AND ALSO THAT THE FINDINGS RENDERED IN THE CITED DECISIONS FOR THE EARLIER YEARS I.E. ASSE SSMENT YEAR 2007-08 IS APPLICABLE FOR THIS YEAR ALSO. WE AGREE WITH THE SUBMISSIONS OF THE ASSESSEE THAT THIS COMPANY IS FU NCTIONALLY DIFFERENT FROM THE ASSESSEE. IT HAS ALSO BEEN SO H ELD BY CO- ORDINATE BENCHES OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 (SUPRA) AS WELL AS IN THE C ASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) . IN VIEW OF THE FACT THAT THE FUNCTIONAL PROFILE OF AND OTHER P ARAMETERS OF THIS COMPANY HAVE NOT CHANGED IN THIS YEAR UNDER CONSIDE RATION, WHICH FACT HAS ALSO BEEN DEMONSTRATED BY THE ASSESS EE, FOLLOWING THE DECISION OF THE CO-ORDINATE BENCHES OF THE TRIB UNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.845/BANG/2011 AND TRILOGY E-BUSINESS SOFTWARE IN DIA PVT. LTD. IN ITA NO.1054/BANG/2011, WE HOLD THAT THIS CO MPANY OUGHT TO BE OMITTED FORM THE LIST OF COMPARABLES. THE A.O./TPO ARE ACCORDINGLY DIRECTED. 10. KALS INFORMATION SYSTEMS LTD. 10.1 THIS IS A COMPARABLE SELECTED BY THE TPO. BEF ORE THE TPO, THE ASSESSEE HAD OBJECTED TO THE INCLUSION OF THIS COMPANY IN THE SET OF COMPARABLES ON GROUNDS OF FUNCTIONAL DIFFERENCES AND THAT THE SEGMENTAL DETAILS HAVE NOT BEEN PROVID ED IN THE ANNUAL REPORT OF THE COMPANY WITH RESPECT TO SOFTWA RE SERVICES REVENUE AND SOFTWARE PRODUCTS REVENUE. THE TPO, HO WEVER, REJECTED THE OBJECTIONS OF THE ASSESSEE OBSERVING T HAT THE SOFTWARE PRODUCTS AND TRAINING CONSTITUTES ONLY 4.24% OF TOT AL REVENUES IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 18 OF 32 AND THE REVENUE FROM SOFTWARE DEVELOPMENT SERVICES CONSTITUTES MORE THAN 75% OF THE TOTAL OPERATING REVENUES FOR T HE F.Y. 2007- 08 AND QUALIFIES AS A COMPARABLE BY THE SERVICE INC OME FILTER. 10.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATI VE CONTENDED THAT THIS COMPANY IS NOT FUNCTIONALLY COM PARABLE TO THE ASSESSEE AND OUGHT TO BE REJECTED / EXCLUDED FROM T HE LIST OF COMPARABLES FOR THE FOLLOWING REASONS :- (I) THIS COMPANY IS FUNCTIONALLY DIFFERENT FRO M THE SOFTWARE ACTIVITY OF THE ASSESSEE AS IT IS INTO SOFTWARE PRO DUCTS. (II) THIS COMPANY HAS BEEN HELD TO BE FUNCTION ALLY NOT COMPARABLE TO SOFTWARE SERVICE PROVIDERS FOR ASSESS MENT YEAR 2007-08 BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL I N THE ASSESSEE'S OWN CASE. THIS COMPANY HAS BEEN HELD TO BE DIFFERENT FROM A SOFTWARE DEVELOPMENT COMPANY IN THE DECISION OF THE TRIBUNAL IN THE CASE OF BINDVIEW INDIA PVT. LTD. V DCIT IN ITA NO.1386/PN/2010. (III) THE REJECTION OF THIS COMPANY AS A COMPAR ABLE HAS BEEN UPHELD BY CO-ORDINATE BENCHES OF THE TRIBUNAL IN TH E CASE OF (A) TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (ITA NO.1054/BANG/2011). (B) LG SOFT INDIA PVT. LTD. (IT (TP) A NO.112/BANG/2011 ) (C) CSR INDIA PVT. LTD. (IT (TP) A NO.1119/BANG/2011) A ND (D) TRANSWITCH INDIA PVT. LTD. (IA NO.6083/DEL/2010) (IV) THE FACTS PERTAINING TO THIS COMPANY HAS N OT CHANGED FROM ASSESSMENT YEAR 2007-08 TO ASSESSMENT YEAR 2008-09 AND THEREFORE THIS COMPANY CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPARABILITY IN THE CASE ON HAND AND HENCE OUGHT T O BE EXCLUDED FROM THE LIST OF COMPARABLES. IN SUPPORT OF THIS C ONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTIO N TO VARIOUS PARTS OF THE ANNUAL REPORT OF THIS COMPANY. (V) THIS COMPANY IS ENGAGED NOT ONLY IN THE DEVELO PMENT OF SOFTWARE PRODUCTS BUT ALSO IN THE PROVISION OF TRAI NING SERVICES AS CAN BE SEEN FROM THE WEBSITE AND THE ANNUAL REPORT OF THE COMPANY FOR THE YEAR ENDED 31.3.2008. (VI) THIS COMPANY HAS TWO SEGMENTS; NAMELY, IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 19 OF 32 A) APPLICATION SOFTWARE SEGMENT WHICH INCLUDES SOFTWAR E PRODUCT REVENUES FROM TWO PRODUCTS I.E. VIRTUAL IN SURE AND LA-VISION AND B) THE TRAINING SEGMENT WHICH DOES NOT HAVE ANY PRODUC T REVENUES. 10.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE CONTENDED THAT THE DECISION OF THE CO-ORDINATE BENC H OF THE TRIBUNAL IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) WAS RENDERED WITH RESPECT TO F.Y.2006- 07 AND THEREFORE THERE CANNOT BE AN ASSUMPTION THAT IT WOU LD CONTINUE TO BE APPLICABLE TO THE YEAR UNDER CONSIDERATION I.E. A.Y. 2008-09. TO THIS, THE COUNTER ARGUMENT OF THE LEARNED AUTHOR ISED REPRESENTATIVE IS THAT THE FUNCTIONAL PROFILE OF TH IS COMPANY CONTINUES TO REMAIN THE SAME FOR THE YEAR UNDER CON SIDERATION ALSO AND THE SAME IS EVIDENT FROM THE DETAILS CULLE D OUT FROM THE ANNUAL REPORT AND QUOTED ABOVE (SUPRA). 10.4 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAR EFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIND FROM TH E RECORD THAT THE TPO HAS DRAWN CONCLUSIONS AS TO THE COMPARABILI TY OF THIS COMPANY TO THE ASSESSEE BASED ON INFORMATION OBTAIN ED U/S.133(6) OF THE ACT. THIS INFORMATION WHICH WAS NOT IN THE PUBLIC DOMAIN OUGHT NOT TO HAVE BEEN USED BY THE TP O, MORE SO WHEN THE SAME IS CONTRARY TO THE ANNUAL REPORT OF T HE COMPANY, AS POINTED OUT BY THE LEARNED AUTHORISED REPRESENTA TIVE. WE ALSO FIND THAT THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 (SUPRA) AND IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) HAVE HELD THAT THIS COMPANY WAS DEVELOPING SOFTWARE PRODUCTS AND WAS NOT PURELY OR MAINLY A SOFTWARE SERVICE PROVIDER. APAR T FROM RELYING OF THE ABOVE CITED DECISIONS OF CO-ORDINATE BENCHE S OF THE TRIBUNAL (SUPRA), THE ASSESSEE HAS ALSO BROUGHT ON RECORD EVIDENCE FROM VARIOUS PORTIONS OF THE COMPANYS ANN UAL REPORT TO ESTABLISH THAT THIS COMPANY IS FUNCTIONALLY DIS- SIMILAR AND DIFFERENT FORM THE ASSESSEE AND THAT SINCE THE FIND INGS RENDERED IN THE DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRI BUNAL FOR ASSESSMENT YEAR 2007-08 (CITED SUPRA) ARE APPLICABL E FOR THIS YEAR I.E. ASSESSMENT YEAR 2008-09 ALSO, THIS COMPAN Y OUGHT TO BE EXCLUDED FROM THE LIST OF COMPARABLES. IN THIS VIE W OF THE MATTER, WE HOLD THAT THIS COMPANY I.E. KALS INFORMATION SYS TEMS LTD., IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 20 OF 32 IS TO BE OMITTED FORM THE LIST OF COMPARABLE COMPAN IES. IT IS ORDERED ACCORDINGLY. 11.0 INFOSYS TECHNOLOGIES LTD. 11.1 THIS WAS A COMPARABLE SELECTED BY THE TPO. B EFORE THE TPO, THE ASSESSEE OBJECTED TO THE INCLUSION OF THE COMPANY IN THE SET OF COMPARABLES, ON THE GROUNDS OF TURNOVER AND BRAND ATTRIBUTABLE PROFIT MARGIN. THE TPO, HOWEVER, REJE CTED THESE OBJECTIONS RAISED BY THE ASSESSEE ON THE GROUNDS TH AT TURNOVER AND BRAND ASPECTS WERE NOT MATERIALLY RELEVANT IN THE S OFTWARE DEVELOPMENT SEGMENT. 11.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATI VE CONTENDED THAT THIS COMPANY IS NOT FUNCTIONALLY COM PARABLE TO THE ASSESSEE IN THE CASE ON HAND. THE LEARNED AUTHORIS ED REPRESENTATIVE DREW OUR ATTENTION TO VARIOUS PARTS OF THE ANNUAL REPORT OF THIS COMPANY TO SUBMIT THAT THIS COMPANY COMMANDS SUBSTANTIAL BRAND VALUE, OWNS INTELLECTUAL PROPERTY RIGHTS AND IS A MARKET LEADER IN SOFTWARE DEVELOPMENT ACTIVITIES, W HEREAS THE ASSESSEE IS MERELY A SOFTWARE SERVICE PROVIDER OPER ATING ITS BUSINESS IN INDIA AND DOES NOT POSSESS EITHER ANY BRAND VALUE OR OWN ANY INTANGIBLE OR INTELLECTUAL PROPERTY RIGHTS (IPRS). IT WAS ALSO SUBMITTED BY THE LEARNED AUTHORISED REPRESENTA TIVE THAT :- (I) THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 24/7 CUSTOMER.COM PVT. LTD. IN ITA NO.227/BANG/2010 HAS HELD THAT A COMPANY OWNING INTANGIBLES CANNOT BE COMPARED TO A LOW RISK CAPTIVE SERVICE PROVIDER WHO DOES NOT OWN ANY INTAN GIBLE AND HENCE DOES NOT HAVE AN ADDITIONAL ADVANTAGE IN THE MARKET. IT IS SUBMITTED THAT THIS DECISION IS APPLICABLE TO THE A SSESSEE'S CASE, AS THE ASSESSEE DOES NOT OWN ANY INTANGIBLES AND HENCE INFOSYS TECHNOLOGIES LTD. CANNOT BE COMPARABLE TO THE ASSES SEE ; (II) THE OBSERVATION OF THE ITAT, DELHI BENCH IN TH E CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD. IN ITA NO.3856 (DEL)/2010 AT PARA 5.2 THEREOF, THAT INFOSYS TECHNOLOGIES LTD. BEING A GIANT COMPANY AND MARKET LEADER ASSUMING ALL RISKS LEADIN G TO HIGHER PROFITS CANNOT BE CONSIDERED AS COMPARABLE TO CAPTI VE SERVICE PROVIDERS ASSUMING LIMITED RISK ; IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 21 OF 32 (III) THE COMPANY HAS GENERATED SEVERAL INVENTION S AND FILED FOR MANY PATENTS IN INDIA AND USA ; (IV) THE COMPANY HAS SUBSTANTIAL REVENUES FROM SOFTWARE PRODUCTS AND THE BREAK UP OF SUCH REVENUES IS NOT A VAILABLE ; (V) THE COMPANY HAS INCURRED HUGE EXPENDITURE FOR RESEARCH AND DEVELOPMENT; (VI) THE COMPANY HAS MADE ARRANGEMENTS TOWARDS ACQU ISITION OF IPRS IN AUTOLAY, A COMMERCIAL APPLICATION PRODUCT USED IN DESIGNING HIGH PERFORMANCE STRUCTURAL SYSTEMS. IN VIEW OF THE ABOVE REASONS, THE LEARNED AUTHORIS ED REPRESENTATIVE PLEADED THAT, THIS COMPANY I.E. INFO SYS TECHNOLOGIES LTD., BE EXCLUDED FORM THE LIST OF COM PARABLE COMPANIES. 11.3 PER CONTRA, OPPOSING THE CONTENTIONS OF THE AS SESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT COMPARABILITY CANNOT BE DECIDED MERELY ON THE BASIS OF SCALE OF OPERATIONS AND THE BRAND ATTRIBUTABLE PROFIT MARGIN S OF THIS COMPANY HAVE NOT BEEN EXTRAORDINARY. IN VIEW OF TH IS, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE D ECISION OF THE TPO TO INCLUDE THIS COMPANY IN THE LIST OF COMP ARABLE COMPANIES. 11.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WE FI ND THAT THE ASSESSEE HAS BROUGHT ON RECORD SUFFICIENT EVIDENCE TO ESTABLISH THAT THIS COMPANY IS FUNCTIONALLY DIS-SIMILAR AND D IFFERENT FROM THE ASSESSEE AND HENCE IS NOT COMPARABLE AND THE FI NDING RENDERED IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) FOR ASSESSMENT YEAR 2007-08 IS APPLICA BLE TO THIS YEAR ALSO. WE ARE INCLINED TO CONCUR WITH THE ARGU MENT PUT FORTH BY THE ASSESSEE THAT INFOSYS TECHNOLOGIES LTD IS NO T FUNCTIONALLY COMPARABLE SINCE IT OWNS SIGNIFICANT INTANGIBLE AND HAS HUGE REVENUES FROM SOFTWARE PRODUCTS. IT IS ALSO SEEN T HAT THE BREAK UP OF REVENUE FROM SOFTWARE SERVICES AND SOFTWARE PROD UCTS IS NOT AVAILABLE. IN THIS VIEW OF THE MATTER, WE HOLD THA T THIS COMPANY OUGHT TO BE OMITTED FROM THE SET OF COMPARABLE COMP ANIES. IT IS ORDERED ACCORDINGLY. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 22 OF 32 12. WIPRO LTD. 12.1 THIS COMPANY WAS SELECTED AS A COMPARABLE BY T HE TPO. BEFORE THE TPO, THE ASSESSEE HAD OBJECTED TO THE IN CLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES ON SEVERAL GROUN DS LIKE FUNCTIONAL DIS-SIMILARITY, BRAND VALUE, SIZE, ETC. THE TPO, HOWEVER, BRUSHED ASIDE THE OBJECTIONS OF THE ASSESS EE AND INCLUDED THIS COMPANY IN THE SET OF COMPARABLES. 12.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATI VE OF THE ASSESSEE CONTENDED THAT THIS COMPANY I.E. WIPRO LTD ., IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE FOR THE FOL LOWING REASONS:- (I) THIS COMPANY OWNS SIGNIFICANT INTANGIBLES IN T HE NATURE OF CUSTOMER RELATED INTANGIBLES AND TECHNOLOGY RELATED INTANGIBLES, OWNS IPRS AND HAS BEEN GRANTED 40 REGISTERED PATENT S AND HAS 62 PENDING APPLICATIONS AND ITS ANNUAL REPORT CONFIRMS THAT IT OWNS PATENTS AND INTANGIBLES. (II) THE ITAT, DELHI OBSERVATION IN THE CASE OF AG NITY INDIA TECHNOLOGIES PVT. LTD. IN ITA NO.3856(DEL)/2010 AT PARA 5.2 THEREOF, THAT INFOSYS TECHNOLOGIES LTD. BEING A GIA NT COMPANY AND A MARKET LEADER ASSUMING ALL RISKS LEADING TO H IGHER PROFITS, CANNOT BE CONSIDERED AS COMPARABLE TO CAPTIVE SERVI CE PROVIDERS ASSUMING LIMITED RISK; (III) THE CO-ORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. (ITA NO.7821/MUM/2011) HAS HELD THAT WIPRO LTD. IS NOT F UNCTIONALLY COMPARABLE TO A SOFTWARE SERVICE PROVIDER. (IV) THIS COMPANY HAS ACQUIRED NEW COMPANIES PU RSUANT TO A SCHEME OF AMALGAMATION IN THE LAST TWO YEARS. (V) WIPRO LTD. IS ENGAGED IN BOTH SOFTWARE DEVEL OPMENT AND PRODUCT DEVELOPMENT SERVICES. NO INFORMATION IS AV AILABLE ON THE SEGMENTAL BIFURCATION OF REVENUE FROM SALE OF PRODU CTS AND SOFTWARE SERVICES. (VI) THE TPO HAS ADOPTED CONSOLIDATED FINANCIAL STATEMENTS FOR COMPARABILITY PURPOSES AND FOR COMPUTING THE MARGIN S, WHICH IS IN CONTRADICTION TO THE TPOS OWN FILTER OF REJECTI NG COMPANIES WITH CONSOLIDATED FINANCIAL STATEMENTS. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 23 OF 32 12.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE ACTION OF THE TPO IN INCLUDING THIS C OMPANY IN THE LIST OF COMPARABLES. 12.4.1 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PE RUSED AND CONSIDERED THE MATERIAL ON RECORD. WE FIND MERIT I N THE CONTENTIONS OF THE ASSESSEE FOR EXCLUSION OF THIS C OMPANY FROM THE SET OF COMPARABLES. IT IS SEEN THAT THIS COMPA NY IS ENGAGED BOTH IN SOFTWARE DEVELOPMENT AND PRODUCT DEVELOPMEN T SERVICES. THERE IS NO INFORMATION ON THE SEGMENTAL BIFURCATIO N OF REVENUE FROM SALE OF PRODUCT AND SOFTWARE SERVICES. THE TP O APPEARS TO HAVE ADOPTED THIS COMPANY AS A COMPARABLE WITHOUT DEMONSTRATING HOW THE COMPANY SATISFIES THE SOFTWAR E DEVELOPMENT SALES 75% OF THE TOTAL REVENUE FIL TER ADOPTED BY HIM. ANOTHER MAJOR FLAW IN THE COMPARABILITY ANALY SIS CARRIED OUT BY THE TPO IS THAT HE ADOPTED COMPARISON OF TH E CONSOLIDATED FINANCIAL STATEMENTS OF WIPRO WITH THE STAND ALONE FINANCIALS OF THE ASSESSEE; WHICH IS NOT AN APPROPR IATE COMPARISON. 12.4.2 WE ALSO FIND THAT THIS COMPANY OWNS INT ELLECTUAL PROPERTY IN THE FORM OF REGISTERED PATENTS AND SEVE RAL PENDING APPLICATIONS FOR GRANT OF PATENTS. IN THIS REGARD, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 24/7 CUSTOMER .COM PVT. LTD. (ITA NO.227/BANG/2010) HAS HELD THAT A COMPANY OWNING INTANGIBLES CANNOT BE COMPARED TO A LOW RISK CAPTIV E SERVICE PROVIDER WHO DOES NOT OWN ANY SUCH INTANGIBLE AND H ENCE DOES NOT HAVE AN ADDITIONAL ADVANTAGE IN THE MARKET. AS THE ASSESSEE IN THE CASE ON HAND DOES NOT OWN ANY INTANGIBLES, F OLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I.E. 24/7 CUSTOMER.COM PVT. LTD. (SUPRA), WE HOLD THAT T HIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE TO THE ASSESSE E. WE, THEREFORE, DIRECT THE ASSESSING OFFICER/TPO TO OMIT THIS COMPANY FROM THE SET OF COMPARABLE COMPANIES IN THE CASE ON HAND FOR THE YEAR UNDER CONSIDERATION. 13. TATA ELXSI LTD. 13.1 THIS COMPANY WAS A COMPARABLE SELECTED BY THE TPO. BEFORE THE TPO, THE ASSESSEE HAD OBJECTED TO THE IN CLUSION OF THIS COMPANY IN THE SET OF COMPARABLES ON SEVERAL COUNTS LIKE, FUNCTIONAL DIS-SIMILARITY, SIGNIFICANT R&D ACTIVITY , BRAND VALUE, IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 24 OF 32 SIZE, ETC. THE TPO, HOWEVER, REJECTED THE CONTENTI ON PUT FORTH BY THE ASSESSEE AND INCLUDED THIS COMPANY IN THE SET O F COMPARABLES. 13.2 BEFORE US IT WAS REITERATED BY THE LEARNED AUT HORISED REPRESENTATIVE THAT THIS COMPANY IS NOT FUNCTIONALL Y COMPARABLE TO THE ASSESSEE AS IT PERFORMS A VARIETY OF FUNCTIO NS UNDER SOFTWARE DEVELOPMENT AND SERVICES SEGMENT NAMELY A) PRODUCT DESIGN, (B) INNOVATION DESIGN ENGINEERING AND (C) V ISUAL COMPUTING LABS AS IS REFLECTED IN THE ANNUAL REPORT OF THE COMPANY. THE LEARNED AUTHORISED REPRESENTATIVE SUB MITTED THAT, (I) THE CO-ORDINATE BENCH OF THE MUMBAI TRIBUNA L IN THE CASE OF TELECORDIA TECHNOLOGIES PVT. LTD. (SUPRA) HAS H ELD THAT TATA ELXSI LTD. IS NOT A FUNCTIONALLY COMPARABLE FOR A S OFTWARE DEVELOPMENT SERVICE PROVIDER. (II) THE FACTS PERTAINING TO TATA ELXSI LTD. HA VE NOT CHANGED FROM THE EARLIER YEAR I.E. ASSESSMENT YEAR 2007-08 TO THE PERIOD UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2008-09 AN D THEREFORE THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE T O THE ASSESSEE IN THE CASE ON HAND. (III) TATA ELXSI LTD. IS PREDOMINANTLY ENGAGED IN PRODUCT DESIGNING SERVICES AND IS NOT PURELY A SOFTWARE DEV ELOPMENT SERVICE PROVIDER. IN THE ANNUAL REPORT OF THIS COMP ANY THE DESCRIPTION OF THE SEGMENT SOFTWARE DEVELOPMENT SE RVICES RELATES TO DESIGN SERVICES AND ARE NOT TO SOFTWARE SERVICES PROVIDED BY THE ASSESSEE. (IV) TATA ELXSI LTD. INVESTS SUBSTANTIAL FUNDS I N RESEARCH AND DEVELOPMENT ACTIVITIES WHICH HAS RESULTED IN THE E MBEDDED PRODUCT DESIGN SERVICES SEGMENT OF THE COMPANY TO CREATE A PORTFOLIO OF REUSABLE SOFTWARE COMPONENTS, READY TO DEPLOY FRAMEWORKS, LICENSABLE IPS AND PRODUCTS. THE LEARNED AUTHORISED REPRESENTATIVE PLEADS THAT IN VIEW OF THE ABOVE REASONS, TATA ELXSI LTD. IS CLEARLY FU NCTIONALLY DIFFERENT / DIS-SIMILAR FROM THE ASSESSEE AND THERE FORE OUGHT TO BE OMITTED FORM THE LIST OF COMPARABLES. 13.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE STAND OF THE TPO IN INCLUDING THIS CO MPANY IN THE LIST OF COMPARABLES. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 25 OF 32 13.4.1 WE HAVE HEARD BOTH PARTIES AND CAREFULL Y PERUSED AND CONSIDERED THE MATERIAL ON RECORD. FROM THE DETAIL S ON RECORD, WE FIND THAT THIS COMPANY IS PREDOMINANTLY ENGAGED IN PRODUCT DESIGNING SERVICES AND NOT PURELY SOFTWARE DEVELOPM ENT SERVICES. THE DETAILS IN THE ANNUAL REPORT SHOW THAT THE SEGM ENT SOFTWARE DEVELOPMENT SERVICES RELATES TO DESIGN SERVICES AN D ARE NOT SIMILAR TO SOFTWARE DEVELOPMENT SERVICES PERFORMED BY THE ASSESSEE. 13.4.2 THE HON'BLE MUMBAI TRIBUNAL IN THE CASE O F TELECORDIA TECHNOLOGIES INDIA PVT. LTD. V ACIT (ITA NO.7821/MU M/2011) HAS HELD THAT TATA ELXSI LTD. IS NOT A SOFTWARE DEV ELOPMENT SERVICE PROVIDER AND THEREFORE IT IS NOT FUNCTIONAL LY COMPARABLE. IN THIS CONTEXT THE RELEVANT PORTION OF THIS ORDER IS EXTRACTED AND REPRODUCED BELOW :- . TATA ELXSI IS ENGAGED IN DEVELOPMENT OF NICHE PRODUCT AND DEVELOPMENT SERVICES WHICH IS ENTIRELY DIFFERENT FR OM THE ASSESSEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARN ED AUTHORISED REPRESENTATIVE THAT THE NATURE OF PRODUC T DEVELOPED AND SERVICES PROVIDED BY THIS COMPANY ARE DIFFERENT FROM THE ASSESSEE AS HAVE BEEN NARRATED IN PARA 6.6 ABOVE. EVEN THE SEGMENTAL DETAILS FOR REVENUE SALES HAVE NOT BEEN P ROVIDED BY THE TPO SO AS TO CONSIDER IT AS A COMPARABLE PARTY FOR COMPARING THE PROFIT RATIO FROM PRODUCT AND SERVICES. THUS, ON THESE FACTS, WE ARE UNABLE TO TREAT THIS COMPANY AS FIT FOR COMP ARABILITY ANALYSIS FOR DETERMINING THE ARMS LENGTH PRICE FOR THE ASSESSEE, HENCE, SHOULD BE EXCLUDED FROM THE LIST OF COMPARA BLE PORTION. AS CAN BE SEEN FROM THE EXTRACTS OF THE ANNUAL REP ORT OF THIS COMPANY PRODUCED BEFORE US, THE FACTS PERTAINI NG TO TATA ELXSI HAVE NOT CHANGED FROM ASSESSMENT YEAR 2007-08 TO ASSESSMENT YEAR 2008-09. WE, THEREFORE, HOLD THAT THIS COMPANY IS NOT TO BE CONSIDERED FOR INCLUSION IN THE SET OF COMPARABLES IN THE CASE ON HAND. IT IS ORDERED ACCORDINGLY. 14. E-ZEST SOLUTIONS LTD. 14.1 THIS COMPANY WAS SELECTED BY THE TPO AS A COMP ARABLE. BEFORE THE TPO, THE ASSESSEE HAD OBJECTED TO THE IN CLUSION OF THIS COMPANY AS A COMPARABLE ON THE GROUND THAT IT WAS F UNCTIONALLY DIFFERENT FROM THE ASSESSEE. THE TPO HAD REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE ON THE GROUND THAT AS PER TH E INFORMATION IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 26 OF 32 RECEIVED IN RESPONSE TO NOTICE UNDER SECTION 133(6) OF THE ACT, THIS COMPANY IS ENGAGED IN SOFTWARE DEVELOPMENT SER VICES AND SATISFIES ALL THE FILTERS. 14.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATI VE CONTENDED THAT THIS COMPANY OUGHT TO BE EXCLUDED FR OM THE LIST OF COMPARABLES ON THE GROUND THAT IT IS FUNCTIONALLY D IFFERENT TO THE ASSESSEE. IT IS SUBMITTED BY THE LEARNED AUTHORISE D REPRESENTATIVE THAT THIS COMPANY IS ENGAGED IN E-B USINESS CONSULTING SERVICES, CONSISTING OF WEB STRATEGY SE RVICES, I T DESIGN SERVICES AND IN TECHNOLOGY CONSULTING SERVIC ES INCLUDING PRODUCT DEVELOPMENT CONSULTING SERVICES. THESE SERV ICES, THE LEARNED AUTHORISED REPRESENTATIVE CONTENDS, ARE HIG H END ITES NORMALLY CATEGORISED AS KNOWLEDGE PROCESS OUTSOURCI NG (KPO) SERVICES. IT IS FURTHER SUBMITTED THAT THIS COMPAN Y HAS NOT PROVIDED SEGMENTAL DATA IN ITS ANNUAL REPORT. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITS THAT SINCE THE AN NUAL REPORT OF THE COMPANY DOES NOT CONTAIN DETAILED DESCRIPTIV E INFORMATION ON THE BUSINESS OF THE COMPANY, THE ASSESSEE PLACES RELIANCE ON THE DETAILS AVAILABLE ON THE COMPANYS WEBSITE WHIC H SHOULD BE CONSIDERED WHILE EVALUATING THE COMPANYS FUNCTIONA L PROFILE. IT IS ALSO SUBMITTED BY THE LEARNED AUTHORISED REPRESE NTATIVE THAT KPO SERVICES ARE NOT COMPARABLE TO SOFTWARE DEVELOP MENT SERVICES AND THEREFORE COMPANIES RENDERING KPO SERV ICES OUGHT NOT TO BE CONSIDERED AS COMPARABLE TO SOFTWARE DEVE LOPMENT COMPANIES AND RELIED ON THE DECISION OF THE CO-ORDI NATE BENCH IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) (P) LTD. IN ITA NO.1961(HYD)/2011 DT.23.11.2012 AND PRAYED THAT IN VIEW OF THE ABOVE REASONS, THIS COMPANY I.E. E-ZEST SOLU TIONS LTD., OUGHT TO BE OMITTED FROM THE LIST OF COMPARABLES. 14.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES BY THE TPO. 14.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE RECORD THAT THE TPO HAS INCLUDED THIS COMPANY IN TH E LIST OF COMPARABLES ONLY ON THE BASIS OF THE STATEMENT MADE BY THE COMPANY IN ITS REPLY TO THE NOTICE UNDER SECTION 13 3(6) OF THE ACT. IT APPEARS THAT THE TPO HAS NOT EXAMINED THE SERVIC ES RENDERED BY THE COMPANY TO GIVE A FINDING WHETHER THE SERVIC ES PERFORMED BY THIS COMPANY ARE SIMILAR TO THE SOFTWARE DEVELOP MENT SERVICES IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 27 OF 32 PERFORMED BY THE ASSESSEE. FROM THE DETAILS ON REC ORD, WE FIND THAT WHILE THE ASSESSEE IS INTO SOFTWARE DEVELOPMEN T SERVICES, THIS COMPANY I.E. E-ZEST SOLUTIONS LTD., IS RENDERING PR ODUCT DEVELOPMENT SERVICES AND HIGH END TECHNICAL SERVICE S WHICH COME UNDER THE CATEGORY OF KPO SERVICES. IT HAS BE EN HELD BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CAPITAL I-Q INFORMATION SYSTEMS (INDIA) (P) LTD. SUPRA) THAT KP O SERVICES ARE NOT COMPARABLE TO SOFTWARE DEVELOPMENT SERVICES AND ARE THEREFORE NOT COMPARABLE. FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THE HYDERABAD TRIBUNAL IN THE AFORESAID CASE, WE HOLD THAT THIS COMPANY, I.E. E-ZEST SOLUT IONS LTD. BE OMITTED FROM THE SET OF COMPARABLES FOR THE PERIOD UNDER CONSIDERATION IN THE CASE ON HAND. THE A.O. / TPO IS ACCORDINGLY DIRECTED. 17. PERSISTENT SYSTEMS LTD. 17.1.1 THIS COMPANY WAS SELECTED BY THE TPO AS A CO MPARABLE. THE ASSESSEE OBJECTED TO THE INCLUSION OF THIS COMP ANY AS A COMPARABLE FOR THE REASONS THAT THIS COMPANY BEING ENGAGED IN SOFTWARE PRODUCT DESIGNING AND ANALYTIC SERVICES, I T IS FUNCTIONALLY DIFFERENT AND FURTHER THAT SEGMENTAL R ESULTS ARE NOT AVAILABLE. THE TPO REJECTED THE ASSESSEE'S OBJECT IONS ON THE GROUND THAT AS PER THE ANNUAL REPORT FOR THE COMPAN Y FOR FINANCIAL YEAR 2007-08, IT IS MAINLY A SOFTWARE DEV ELOPMENT COMPANY AND AS PER THE DETAILS FURNISHED IN REPLY T O THE NOTICE UNDER SECTION 133(6) OF THE ACT, SOFTWARE DEVELOPME NT CONSTITUTES 96% OF ITS REVENUES. IN THIS VIEW OF THE MATTER, T HE ASSESSING OFFICER INCLUDED THIS COMPANY I.E. PERSISTENT SYSTE MS LTD., IN THE LIST OF COMPARABLES AS IT QUALIFIED THE FUNCTIONALI TY CRITERION. 17.1.2 BEFORE US, THE ASSESSEE OBJECTED TO THE I NCLUSION OF THIS COMPANY AS A COMPARABLE SUBMITTING THAT THIS COMPAN Y IS FUNCTIONALLY DIFFERENT AND ALSO THAT THERE ARE SEVE RAL OTHER FACTORS ON WHICH THIS COMPANY CANNOT BE TAKEN AS A COMPARAB LE. IN THIS REGARD, THE LEARNED AUTHORISED REPRESENTATIVE SUBMI TTED THAT : (I) THIS COMPANY IS ENGAGED IN SOFTWARE DESIGNING SERVICES AND ANALYTIC SERVICES AND THEREFORE IT IS NOT PURELY A SOFTWARE DEVELOPMENT SERVICE PROVIDER AS IS THE ASSESSEE IN THE CASE ON HAND. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 28 OF 32 (II) PAGE 60 OF THE ANNUAL REPORT OF THE COMPAN Y FOR F.Y. 2007-08 INDICATES THAT THIS COMPANY, IS PREDOMINANT LY ENGAGED IN OUTSOURCED SOFTWARE PRODUCT DEVELOPMENT SERVICES FOR INDEPENDENT SOFTWARE VENDORS AND ENTERPRISES. (III) WEBSITE EXTRACTS INDICATE THAT THIS COMPA NY IS IN THE BUSINESS OF PRODUCT DESIGN SERVICES. (IV) THE ITAT, MUMBAI BENCH IN THE CASE OF TELE CORDIA TECHNOLOGIES INDIA PVT. LTD. (SUPRA) WHILE DISCUSSI NG THE COMPARABILITY OF ANOTHER COMPANY, NAMELY LUCID SOFT WARE LTD. HAD RENDERED A FINDING THAT IN THE ABSENCE OF SEGME NTAL INFORMATION, A COMPANY BE TAKEN INTO ACCOUNT FOR CO MPARABILITY ANALYSIS. THIS PRINCIPLE IS SQUARELY APPLICABLE TO THE COMPANY PRESENTLY UNDER CONSIDERATION, WHICH IS INTO PRODUC T DEVELOPMENT AND PRODUCT DESIGN SERVICES AND FOR WHICH THE SEGME NTAL DATA IS NOT AVAILABLE. THE LEARNED AUTHORISED REPRESENTATIVE PRAYS THAT I N VIEW OF THE ABOVE, THIS COMPANY I.E. PERSISTENT SYSTEMS LTD. BE OMITTED FROM THE LIST OF COMPARABLES. 17.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORT THE ACTION OF THE TPO IN INCLUDING THIS COM PANY IN THE LIST OF COMPARABLES. 17.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE DETAILS ON RECORD THAT THIS COMPANY I.E. PERSISTENT SYSTEMS LTD., IS ENGAGED IN PRODUCT DEVELOPMENT AND PRODUCT DESIGN S ERVICES WHILE THE ASSESSEE IS A SOFTWARE DEVELOPMENT SERVIC ES PROVIDER. WE FIND THAT, AS SUBMITTED BY THE ASSESSEE, THE SEG MENTAL DETAILS ARE NOT GIVEN SEPARATELY. THEREFORE, FOLLOWING THE PRINCIPLE ENUNCIATED IN THE DECISION OF THE MUMBAI TRIBUNAL I N THE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. (SUPRA) THA T IN THE ABSENCE OF SEGMENTAL DETAILS / INFORMATION A COMPAN Y CANNOT BE TAKEN INTO ACCOUNT FOR COMPARABILITY ANALYSIS, WE H OLD THAT THIS COMPANY I.E. PERSISTENT SYSTEMS LTD. OUGHT TO BE OM ITTED FROM THE SET OF COMPARABLES FOR THE YEAR UNDER CONSIDERA TION. IT IS ORDERED ACCORDINGLY. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 29 OF 32 15. SINCE THE TRIBUNAL HAS TAKEN A PARTICULAR VIEW WITH REGARD TO THESE COMPARABLES, WE FIND NO JUSTIFICATION IN TAKING A C ONTRARY VIEW. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) WHO HAS RIGHTLY EXCLUDED THESE COMPARABLES FROM THE FINAL SET OF COMPARABLES. 16. SO FAR AS FLEXTRONICS SOFTWARE SYSTEMS LTD ., IGATE GLOBAL SOLUTIONS LTD. , SASKEN COMMUNICATION TECHNOLOGIES LTD . ARE CONCERNED, IT HAS BEEN ARGUED THAT THESE COMPARABLES WERE EXCLUDED BY THE CIT(APPEALS) HAVING APPLIED THE TURNOVER FILTER. THE TURNOVER OF THESE COMPANIES ARE MORE THAN 10 TIMES THE TURNOVER OF THE ASSESSEE. THIS PROPOS ITION OF LAW HAS BEEN LAID DOWN BY THE TRIBUNAL IN THE CASE OF ACIT V. MCAFEE SOFTWARE (INDIA) PVT. LTD. IN IT(TP)A NO. 04/BANG/2012, COPY OF WHICH IS PLACED ON RECORD. 17. THE LD. DR, HOWEVER, SUBMITTED THAT THE TURNOVE R FILTER SHOULD NOT BE APPLIED AS IT CANNOT BE CRITERIA FOR EXCLUSION OF T HESE COMPARABLES. 18. HAVING CAREFULLY EXAMINED THE ORDER OF THE TRIB UNAL AND THE TURNOVER OF THESE COMPARABLES, WE FIND THAT THE TURNOVER OF THESE COMPARABLES IS CERTAINLY 10 TIMES MORE THAN THE ASSESSEE. THE TRI BUNAL HAS BEEN TAKING A CONSISTENT VIEW THAT TURNOVER FILTER WILL APPLY WHI LE SELECTING COMPARABLES IN ORDER TO DETERMINE THE ALP OF THE INTERNATIONAL TRA NSACTIONS. WE, HOWEVER, FOR THE SAKE OF REFERENCE, EXTRACT THE RELEVANT OBS ERVATIONS OF THE TRIBUNAL IN THE CASE OF ACIT V. MCAFEE SOFTWARE (INDIA) PVT. LTD. (SUPRA) HEREUNDER:- 8. AS A GENERAL PROPOSITION, VARIOUS FILTERS ARE REQUIRED TO BE ADOPTED IN SELECTING A COMPANY AS A COMPARABLE. TH IS IS PART OF IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 30 OF 32 FAR ANALYSIS. HOWEVER, THERE CANNOT BE RIGID RULE OR PERCENTAGE FIXED IN ADOPTING VARIOUS FILTERS. GENERALLY, A TU RNOVER FILTER IS ADOPTED TO AVOID SELECTION OF HIGH END COMPANIES (B IG COMPANIES) WITH THAT OF MINNOWS IN THE SIMILAR LINE OF BUSIN ESS. HOW TO ADOPT THE FILTER DEPENDS ON EACH CASE. SAY FOR EXAMPLE, IN THE TP ANALYSIS OF A COMPANY HAVING 20 CRORES RECEIPTS, A COMPANY W ITH 2 CRORES TO 200 CRORES CAN BE STATED TO BE WITHIN THE RANGE I.E ., FACTOR OF TEN AS UPPER AND LOWER LIMITS. IN CERTAIN CASES, THE ITAT ALSO ACCEPTED TURNOVER FILTER OF 1 CRORE TO 200 CRORES. BUT THE RANGE CANNOT BE FIXED, AS THE FACTS MAY VARY FROM CASE TO CASE. SIM PLY A COMPARABLE CAN NOT BE EXCLUDED ON UPPER TURNOVER LIMIT WHEN IN FACT IN NUMBER OF CASES ASSESSEES DO NOT RAISE ANY OBJECTION ON IN CLUSION OF COMPANIES WITH VERY SMALL TURNOVERS. THE 200 CRORE S UPPER LIMIT ALSO CANNOT BE CONSIDERED IN A CASE WHOSE TURNOVER IS, SAY 300 CRORES. THEREFORE, INSTEAD OF A FIXED 1CR 200 CR ORE RANGE, WHAT ONE HAS TO CONSIDER IS THE TURNOVER/RECEIPTS OF ASS ESSEE AND RANGE OF UPPER LIMIT AT TEN TIMES AND LOWER LIMIT ALSO TEN T IMES..I.E., ONE TENTH. THUS, FOR EXAMPLE THE RANGE FOR A 300 CRORES COMPAN Y CAN BE FROM 30 CRORES (1/10 TH ) TO 3000 CRORES (TEN TIMES). EVEN THIS HAS SOME LIMITATIONS. FOR EXAMPLE IF RANGE IS CONSIDERED SA Y 2 TO 200 CRORES, A COMPARABLE COMPANY CANNOT BE REJECTED IF THE TURN OVER IS 1.99 CRORES OR SAY 201 CRORES. THERE CAN BE MARGIN OF V ARIATION. THESE ARE BROAD PARAMETERS SO THAT NO FIXED FORMULA CAN B E ADOPTED ON UNIFORM BASIS ACROSS ALL AREAS OF FUNCTIONS. THE S AME PRINCIPLES WILL ALSO APPLY TO RELATED PARTY TRANSACTIONS. IN ALL T HE CAPTIVE SERVICE PROVIDERS, RPT IS AT 100%. SO, SOME BROAD PARAMETE RS, GIVEN THE FACT OF THE CASE, CAN ONLY BE CONSIDERED. CONSIDER ING THESE OBSERVATIONS, LEARNED COUNSEL FAIRLY ADMITTED THAT THEY WILL NOT CONTEXT THE RPT FILTER AND TURNOVER FILTER ISSUE AN D RESTRICTED THE AGREEMENTS TO ONLY THE COMPARABILITY OF THE CASES O N FUNCTIONALITY. ACCORDINGLY, THE ISSUES ON RPT, TURNOVER FILTER AND RISK ADJUSTMENT ARE CONSIDERED NOT PRESSED. 19. SINCE WE HAVE BEEN TAKING A CONSISTENT VIEW THA T BY APPLYING THE TURNOVER FILTER, COMPARABLES CAN BE EXCLUDED, WE TH EREFORE FIND NO INFIRMITY IN THE ORDER OF CIT(APPEALS), WHO HAS RIGHTLY APPLI ED THE TURNOVER FILTER. IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 31 OF 32 20. SOFTSOL INDIA LTD. : THE CIT(APPEALS) HAVING APPLIED THE RPT FILTER MORE THAN 15% HAS EXCLUDED THIS COMPANY AS A COMPAR ABLE. IN THE INSTANT CASE, THE RPT WAS 18.3%. IT HAS BEEN REPEAT EDLY HELD THAT RPT FILTER IS NOT A WATER TIGHT COMPARTMENT AND WHERE O NCE IT CROSSES 15%, THE COMPARABLE HAS TO BE EXCLUDED. IN A NUMBER OF CASE S, WE HAVE CONFIRMED THE RPT PERCENTAGE OF 15 TO 20%. IN THE INSTANT CA SE, SINCE THE RPT IS 18.3%, WE FIND NO JUSTIFICATION IN EXCLUSION OF THI S COMPARABLE FROM THE LIST OF COMPARABLES. WE THEREFORE DO NOT FIND OURSELVES IN AGREEMENT WITH THE ORDER OF CIT(APPEALS), WHO HAS EXCLUDED THIS COMPAR ABLE FROM THE LIST OF COMPARABLES. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(APPEALS) AND DIRECT THE TPO/AO TO TAKE INTO ACCOUNT THIS COMPARA BLE WHILE DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS. ACCORDI NGLY, THE AO/TPO IS DIRECTED TO RECOMPUTE THE ALP IN THE TERMS INDICATE D ABOVE. 21. THE GROUND RAISED IN THE CO IS WITH REGARD TO D EDUCTION U/S. 10A OF THE ACT. IN THIS REGARD, IT HAS BEEN CONTENDED THA T THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD., 349 ITR 98 (KARN) , IN WHICH IT HAS BEEN HELD THAT ONCE A PARTICULAR ITEM IS TO BE EXCLUDED FROM THE E XPORT TURNOVER, IT SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER. WE ACCOR DINGLY FOLLOWING THE SAME, SET ASIDE THE ORDER OF THE CIT(APPEALS) AND R ESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO RECOM PUTE THE DEDUCTION U/S. 10A FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICT IONAL HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD. (SUPRA) . IT(TP)A NO.460/BANG/2013 & CO NO.96/BANG/2015 PAGE 32 OF 32 22. REGARDING OTHER GROUNDS WITH REGARD TO ADJUSTME NT OF ALP, WE FIND NO FORCE IN THE CONTENTION OF THE ASSESSEE, AS THES E GROUNDS WERE NOT EFFECTIVELY ARGUED BY THE LD. COUNSEL. ACCORDINGLY WE REJECT THE SAME. 23. IN THE RESULT, THE APPEAL OF REVENUE AS WELL AS CO OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF FEBRUARY, 2017. SD/- SD/- ( S. JAYARAMAN ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 22 ND FEBRUARY, 2017. / D S / COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.
